European Union nations have rewarded Myanmar for its "remarkable" reforms by suspending most sanctions, a move opening the way to a potential trade and investment bonanza for Europe.

EU foreign ministers meeting in Luxembourg on Monday approved a one-year suspension of sanctions against almost 500 individuals and more than 800 firms, but keep an arms embargo in place.

"The situation in the Myanmar is "looking much better" after the "remarkable progress" culminating in opposition leader Aung San Suu Kyi's election to parliament on April 1," a senior EU diplomat who asked not to be identified, said.

But a decision to suspend rather than remove restrictive measures aims to "send a signal that we are continuing to watch", he added.

"It is not set in stone that this [reform] trajectory will continue".

Discord

"We will now enter into an active collaboration with Myanmar, to assist the reform process and to contribute to economic, political and social development."

- Catherine Ashton, EU Foreign Policy Chief

In a first sign of discord, Suu Kyi's party announced on Sunday it would postpone its parliamentary debut in a dispute over the swearing-in oath.

Despite the gathering pace of reforms by Myanmar's military leaders, EU nations were split over doing away with sanctions, with countries such as Germany favouring a swift lifting while Britain remained keen to maintain leverage in a nation still dominated by the army.

In an about-turn following the April 1 vote, however, David Cameron, the British prime minister, and Nobel laureate Suu Kyi urged a suspension of measures dating back to 1996 and reinforced several times since.

In all, 491 individuals stand targeted by an EU travel ban and asset freeze, though the bloc last February eased its stand by lifting a visa ban on 87 top Myanmar officials, including President Thein Sein.

On the economic front, the EU imposed a ban on doing business in Myanmar, barring investment and banning imports of the country's lucrative timber, metals and gems.

As businessmen queue up to return, EU foreign policy chief Catherine Ashton this week said she would travel to Myanmar on April 28-30 and had invited the southeast Asian state's foreign minister to Brussels.

"I do hope that what we are now seeing is an opportunity for this country to go forward," she said.

"We will now enter into an active collaboration with Myanmar, to assist the reform process and to contribute to economic, political and social development."

President Thein Sein has surprised observers with a series of reforms since taking office last year, including accepting Suu Kyi and her party back into the mainstream and freeing hundreds of political prisoners.

Western sanctions remained largely intact however as the international community balanced fears over the sustainability of the changes and a desire to bolster regime reformers who may face pressure from those wary of change.